20 Years German Private Equity and Venture Capital Association (BVK)
April 14, 2009
By Dr. Bernd Geiger, Triangle
Germany is a great country for venture capital investors. There is a broad pool of highly educated young people, a number of publically-sponsored research projects, an unparalleled entrepreneurial spirit, and a good number of "nascent" entrepreneurs – we could be the Silicon Valley of Europe! So why are those entrepreneurs merely "nascent"?
Statistics* show that of the European fundraising activities in 2008 exactly 8.9% of all funds collected from private equity/VC companies came from Germany, Switzerland and Austria – even though the share of the German population in the EU is 16.5% and the country contributes 20% to GDP. If we assume that the VC share is much lower still, that is a poor showing indeed.
What does this phenomenon have to do with entrepreneurship? A lot – the more entrepreneurs there are in a country, the more venture capital companies there will be, for one thing because private VCs often recruit from successful entrepreneurs. In Germany, however, where the maxim is "market failure", the government feels it must get involved and function as a VC (but without adhering to a VC's investment criteria). And then everyone is ordered to be successful! Surely many good ideas would have been much more successful if the founders had had to work harder to acquire private money, and had successful examples to follow. Instead, we see ludicrous action being taken on the German VC market such as the VC branch of a state bank that had due diligence performed on a start-up by a third party (!) but never spoke directly with the CEO and then denied credit on the basis of poor economic prospects.
Just like the German research spirit, entrepreneurship has been scrutinized, and held at arm’s length, for long enough. What we really lack is a positive atmosphere, in which individual responsibility and its resulting success is predominant, and where the glass is considered half-full and not half-empty, to serve as a good example to "nascent" entrepreneurs. Achieving that is the primary task of the political system, whereupon the entrepreneurs among us can build the Silicon Valley of Europe over the next 20 years!
*EVCA PREREP Analytics 2008 European Private Equity Markets